Kering Sa Ord

Welcome to the Caring 2026 First Quarter Revenue Conference Call and Audio Cast. Please be advised that today's conference is being recorded. As a reminder, all participants are in a listen-only mode. At this time, I would like to turn the conference over to Amal Pulu, Group Chief Financial Officer. Please go ahead, Madam. Thank you.

Good evening to all of you and welcome to Caring 2026 First Quarter Revenue Call. We are speaking to you today from Gucci headquarters in Florence, just two days ahead of our Capital Market Day. I will be reviewing our performance, and we will be joined by Philippine Lechon, head of IR, for the Q&A session. Starting on slide 5, we introduce our new segment reporting, which was announced on March 16, and reflects the group's strategic priorities. We are now organized around four segments, carrying fashion and leather goods, including Gucci, Saint Laurent, Bottega Veneta, Balenciaga, McQueen, and Brioni. Carrying jewelry, bringing together Boucheron, Pomelato, Dodo, and Killeen. Carrying eyewear as a standalone segment, and corporate and other, which includes group services and jewelry 1735. Gucci is obviously part of carrying fashion and leather goods, but its performance will also be disclosed separately, given its weight in the group's revenue and our commitment to a high level of transparency in the context of the transformations currently underway. On slide 6, group revenue in the quarter came close to 3.6 billion euros, down 6% as reported, impacted by the strengthening of the euro, and stable year-on-year on a comparable basis. This stabilization represents an important first milestone and a further sequential improvement. It was delivered in a challenging and uncertain environment with low visibility and continued pressure on consumer confidence. Geopolitical tensions, notably in the Middle East, also weighted on traffic and performance during the quarter, a point I will come back to. Regional trends remained uneven. Western Europe continued to face headwinds, while North America delivered an excellent quarter with growth across all brands, clearly standing out as the group's strongest region. Q1 also demonstrated continued progress in terms of ambition and balance sheet strengthening. We executed several major strategic moves across jewelry, beauty, and real estate, clearly sharpening the group's focus and significantly enhancing our financial flexibility. In jewellery, we announced the creation of Canning Jewellery and finalized our initial 20% stake in Ravelli Franco, one of the largest independent luxury jewellery manufacturers in Europe. This marked a major step in building a sizable industrial platform to support long-term growth in jewellery with a clear pathway to full ownership. In beauty, we completed our strategic partnership with L'Oréal with the disposal of Kéline Bauté for 4 billion euros in cash and continued cooperation through a joint venture to explore opportunities in longevity and wellness. In real estate, consistent with our commitments, we completed a new refinancing transaction for our Via Monte Napoleone asset in Milan, following similar partnerships in Paris and New York, enhancing balance flexibility while securing strategic locations for our houses. In parallel, we continue to optimize our distribution network and set that vigilance on both CAPEX and OPEX while never compromising the actions required to preserve and strengthen the brand equity of our houses. Moving on to our quarterly revenue in more detail on slide 7. As you can see, performance remains uneven across segments, although sequential trends are positive across the board. Caring, Passion and Leather Goods declined by 3% on a comparable basis, representing a sequential improvement of 2 points versus Q4. Within the segment, Gucci was on 8%, also showing a sequential improvement, as the house continued to make progress in its turnaround. Kering Jewelry delivered another very strong quarter, up 22% on a comparable basis, clearly standing out as a growth engine for the group. Performance was supported by strong brand momentum and solid execution across regions. Kering Airwear grew by 7% on a comparable basis, once again confirming the strength, consistency, and resilience of this business driven by the breadth of the portfolio and continued operational execution. Finally, corporate and other was up 10% on a comparable basis over the first quarter, notably driven by the very strong performance of January 1735. Overall, our geographic mix remains well balanced with only modest shifts during the quarter, Asia-Pacific and the rest of the world were down 1 point, while North America and Western Europe each gained 1 point. On slide 6, let's review the top line by channel and region. Retail, accounting for 71% of revenue, was down 2% on a comparable basis. Within retail, e-commerce moved 6% year-on-year and represented 12% of retail sales. Western Europe declined by 7% comparable in the quarter. France remained challenging, particularly due to softer tourist flows, notably from Asia and Middle East. North America delivered a very strong quarter of 9% comparable, clearly standing out as the best-performing region, driven by a favorable mix stood toward the high end, with positive contributions from all brands, including Gucci. Japan declined by 3% comparable, a marked improvement versus previous quarters. Performance continued to be driven by the jewelry houses. Tourist spending remained negative, reflecting a less attractive pricing gap, while demand from local clients turned positive. Asia-Pacific declined 4% comparable, an improvement of 2 points compared with Q4 after 5 points between Q3 and Q4. Strong performances in South Korea, Hong Kong, and to a lesser extent Taiwan, were not sufficient to offset the decline in mainland China. As in Q4, the Chinese cluster ended the period down in the big teams. Finally, the rest of the world declined by 8% on a comparable basis, mainly reflecting a deterioration in performance in the Middle East since the beginning of the conflict in the region. Our retail network, comprising 1,672 stores, showed a net increase of 47 units compared with year-end. Over the period, Gucci's store count declined by 11 net units. In line with the commitment set out at our 2025 full-year results, we reaffirm our objective to achieve at least 100 net store closures by the end of December. Wholesale and other revenue, accounting for 29% of the total, was up 6% comparable in the quarter, with a continuing good momentum in eyewear. Let's now move to killing fashion and leather goods on slide 9. Revenue stood at 2.9 billion euros, down 9% reported and 3% comparable. The retail channel showed a similar trend, declining by 4% on a comparable basis. You will find the usual details by region in the appendix of the presentation. Before turning specifically to Gucci, let me first say a few words about the other brands within the segment. Saint Laurent, Bottega Veneta, Balenciaga and Brioni delivered year-on-year growth in the quarter, notably led by North America. At Saint Laurent, Results reflected a very strong performance in shoes and ready-to-wear, combined with a successful rollout of new products, including the Mombasa handbag. Bottega Veneta showed solid trends in Asia Pacific, underpinned by a robust product pipeline and sustained brand desirability, with good traction in the full-price network and an increase in average unit retail on handbags. Balenciaga delivered another quarter of growth, supported by sustained demand in leather goods, building on the success of the city and rodeo lines. Prigioni confirmed a very positive momentum over the period, with particularly strong growth in bespoke. As expected, McQueen continued its rationalization, in line with the actions undertaken to reset the brand. Wholesale and other was up 2%, with royalties and other revenue increased by 6%. Focusing on Gucci, now on side 10. The house recorded sales of 1.3 billion in the first quarter, down 14%, as reported, and 8% on a comparable basis year-on-year. North America delivered a solid performance of 7% year-on-year, driven by strong newness and increasing AUR, providing early confirmation that the strategic reset is starting to gain traction. This momentum, however, was not sufficient to upset weaker trends in Asia-Pacific and Western Europe during the quarter. Beyond the short term, the quarter was firmly execution-driven, marked by decisive actions across product distribution and client engagement. We have refocused product architecture, strengthened category priorities, and are progressively rolling out new collections in stores. The introduction of See Now, Buy Now initiatives, even though it applies to a limited number of products, is designed to improve responsiveness, sharpen newness, and better align product growth with client demand. Looking ahead, upcoming milestones are meaningful. Our capital market today will provide greater visibility on the Gucci roadmap, while the cruise show in New York next month will be another key moment to showcase the brand's renewed creative energy and product direction. While the recovery will be gradual, the fundamentals are being rebuilt in the right order. With disciplined execution, clearer creative leadership, and a sharper focus on core clients and products, We are confident in Gucci's ability to progressively restore momentum and create long-term value. On slide 11, Kering Jewellery delivered an outstanding performance, reaching a return level. Sales were up 14% as reported and 22% on a comparable basis. In the directly operated retail network, sales grew by 28% while all sale revenue increased by 14%. Performance was broad-based across key regions with standout demand in Japan and Asia-Pacific, notably in South Korea. Brand momentum at Boucheron was positive this quarter, with the house delivering the highest growth within the group, supported by robust performance across its main markets. Pomelato also posted solid growth, supported by strong traction in Japan, and thanks to the new Dodo, Iconica, and Together collections. Dodo extended several quarters of the stand growth, while Seagulls recorded a strong performance driven by Asia. Beyond the quarter, Kering Jewelry continues to confirm its role as a structural growth engine for the group. The category benefits from strong underlying fundamentals and from the disciplined way we are selling it across houses and regions. With strong brand desirability, a growing retail footprint, and an increasingly integrated industry of backbone, we are confident in jewelry's ability to increase its contribution to group revenue over time. On slide 12, revenue of Kering Eyewear division. Kering Eyewear delivered a landmark performance, marking the strongest quarter in its history. Sales amounted to 489 million, up 3% as reported, and 7% on a comparable basis, reflecting very strong demand across the portfolio. This performance, once again, highlights the strength, resilience, and scalability of the iWear platform. Growth was supported by a combination of high-profile product launches, including the first Valentino iWear collection, developed by Tending iWear, strong sell-out momentum, and successful commercial execution around major industry trade events. Marketing and communication initiatives across brands also played an important role, reinforcing visibility and desirability, while execution remained consistently strong across key markets. Beyond supporters, iWear continues to demonstrate the relevance of our integrated model, combining brand desirability, industrial expertise, and disciplined execution. With its diversified brand portfolio and recurring demand profile, King Eyewear remains a highly attractive and reliable growth engine for the group. On slide 13, I will make a few comments about the corporate and other segments. In the first quarter, revenue from corporate and other amounted to $30 million, down 7% as reported, and up 10% on a comparable basis, with the variance mainly explained by scope effects. Within the segment, January 1735 delivered a very good quarter, with double-digit growth, reflecting continued progress in brand development, positioning, and desirability. Before turning to our outlook, let me briefly address the situation in the Middle East. Since the end of February, the situation in the region has remained an area of heightened attention for the group. Our priority is and remains the safety of our teams. To date, none of our employees has been directly affected. The region represents around 5% of our retail revenue, with approximately 1,100 employees and 79 stores. The crisis unit was immediately activated and continues to manage the situation in real time. While some areas experienced temporary disruption, the retail network is fully operational today. In the first quarter, retail revenue in the region declined by 11% after a positive start to the year. Beyond the local impact, the key consideration going forward leads to potential effects on global tourism flows and is a broader macroeconomic environment which we continue to monitor closely. After all, we are operating in a still uncertain geopolitical and macroeconomic context. In this environment, our focus is on agility, discipline, and flawless execution. We are equipping each house with sharper, more sustainable brand strategies, and the operational capabilities required to accelerate progress. As we move through 2026, our objective remains to return to growth and improve margins. We look forward to sharing more details on our strategy and roadmap at our Capital Markets Day on Thursday. And with that, we are now ready to take your questions. Operator?

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 11 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A queue. If you wish to cancel your request, please press star 11 again. Please ask your question as distinctly as possible and put all devices on mute apart from the phone you are using to ask your question. We will now go to the first question. One moment, please. And your first question today comes from the line of Thomas Chauvet from Citi. Please go ahead.

Good evening, Amel, and Philippine. Thanks for taking my question. I have three, if I can. The first one on the performance of the various cohorts for Gucci in Q1 relative to Q4 for retail. So Americans look pretty strong, but perhaps that the Chinese, Europeans, Japanese and, of course, Middle Easterners. And the Q2 comp is quite similar to Q1. So are you seeing a change in trend in March or April with the other cohorts outside, of course, the Middle Easterners? Secondly, you've talked about product newness and deliveries of first collection. If we take the three brands where you've had a new creative direction and a first collection delivered to store in Chihuahua with Chibotega and Balenciaga. How would you rank them in terms of the strongest customer response you received on that inaugural collection? And finally, on your guidance that you will confirm, I know you'll talk at the CMV about the longer-term perhaps road mark, but if we think just about 26, you reconfirmed it would be a year of constant effect sales growth and margin expansion for Bucci and the other key brands. How do you think about the phasing of that return to growth in light of the Q1 performance, the tougher comps in H2, and now the disruption to the Middle East and to global tourist flow as you just alluded to? Thank you.

Thank you, Thomas. Just three questions, but happy to answer. So on the first one, what I can say on the GUCCI cohort by nationalities is that we saw improvement in most of the nationalities. If I start by the Americans, we saw a strong improvement of the American cohort in Q1 versus Q4. actually turning positive. In Europe, we also saw a very nice improvement with European cohort still negative, but improved quite significantly from before. I would say we had also a nice improvement in other Asians. While Japan remains difficult for Japanese, and I would say for the Chinese, the situation was sort of flat to Q4, still negative. Regarding your question, your second question, on current trading. So, you know we are only two weeks into the quarter. But what I can say is that if I compare the beginning of the quarter and maybe the month of March, performance remains broadly in line with what we saw in Q1 at book level. But of course, we need to see what's going to happen in the coming weeks. If I go to your third question regarding customer response and your new creative director, we are very happy with the response to our new creative director. You know, if I start with Gucci, but maybe the main comment is to say that in the three brands where we have a new creative director, we see a good response to new net introduction. So this is for us a very good sign. As you know, it's the beginning of the new product rolling out into stores. It will increase progressively along the year. So, of course, we are looking forward to seeing the confirmation of that in the next quarters. But the first signs are very encouraging. Okay. Now, I think... You asked me a question on the exit rates and the guidance. So, as you know, we posted a Q1 flat, and March also was flat. Now, if we consider the impact of the Middle East crisis, and if we look at what would have been the performance without the Middle East crisis, March actually would have posted 3%. growth. Now, so this is encouraging. Now, for the full year, as we've always said, we expect the improvement to be gradual and sequential along the year in a context that is extremely volatile.

Thank you, Armin.

Thank you. Your next question today comes from the line of Eduard Alvin from Morgan Stanley. Please go ahead.

Yeah, good evening. I'm Alan Philippine. Really looking forward to see you in Florence tomorrow. So three questions for me as well, mostly on Gucci. So I'm sure you're going to elaborate more in greater detail tomorrow, Armel, on that topic. But in terms of the product rollout at Gucci, I think, you know, La Famiglia, which, you know, was hitting the shelf mostly in January, was relatively small in terms of the assortment, about 7%, 8%, I assume. What should we see, you know, in terms of April? I think, you know, you have the so-called Loot Book or Generation Gucci, I don't know how you call it, you know, hitting the shelves this month. To what extent is that going to be more material? And then, you know, Primavera in April. in the third quarter so that would be my first question in terms of the the share of the small assortment which would be uh new and designed by them now uh the second one is if you i guess you should have by now good visibility on your wholesale uh expectation for q2 i think you are up two percent of gucci and two percent fashion at the good as you said in q1 do you expect more or less the same type of uh of trajectory for for q2 for for these uh two components And then lastly, you just talked about the divergence between China and the U.S. for Gucci. You gave us the performance by cohort. I think obviously most brands are doing better in the U.S. than in China, but Gucci is quite an extreme example in terms of the divergence. And I guess maybe you're going to talk about it more tomorrow and Thursday in greater detail, but how do you explain the fact that you're lagging in China and what are you doing to get things to Gucci to trend better in that geography? Thank you.

Thank you, Edouard. So let me answer on your first question. I think you very correctly mentioned the progressive rollout of new collections from La Familia, the Lookbook, and Primavera. Maybe the share of La Familia product was a bit higher than when you mentioned. Higher in SKU, but even higher in sales, considering the good reaction to those new products. I would say, you know, as a whole, we are also happy to see, of course, the traction on the new introduction with La Familia, the See Now, Buy Now of Imavera. And that will be confirmed with the full collection of Imavera over the summer. But also, I would like to mention that we see a good resilience of our new net in the portfolio. which is something that is encouraging, both in terms of sales, but with also an AUR that is higher within production of new products that are resonating better. But also at the same time, and I think that is also some very encouraging elements, is to remember we had a very difficult time performance very negative of the carryover for many quarters, and I would say that the first quarter where we see the carryover performance getting better, much better, partially because we are now in the carryover, some of the introduction like the studio of the emblem of last year, and also we see, we are very happy with the success of the reintroduction of the new Marmont, As you know, this product has been introduced with a better quality and a slightly improved design. And those three products are supporting the performance of the Cameo. Your second question was on wholesale, if I remember correctly. Wholesale for Q2, it's a bit difficult to give you a... but it could be in the same area as what we saw in Q1. Finally, you asked me a question on the situation and the performance of Gucci in China, and you are perfectly right that the performance of Gucci in China is quite different from what we can see in some of our peers, and we've been always very clear on the fact that we have been suffering in China from the fact that the market was not very supportive, but also from the fact that we have our own issues. We are actively working on that, fixing the issues with a dedicated plan for China. We are rebuilding the cultural relevance in China with sharper storytelling, stronger ambassadors, and region-specific activation, while, as you know, we are also working to improve and upgrade our store network in China. But as you said, you will have more information during the capital market day.

Okay, wonderful. Thank you.

Thank you. So now the next question. And the next question comes from the line of Anne-Laure Business from HSBC. Please go ahead.

Yes, hi. Good evening, Armel and Philippine. I have two questions, please. The first one is about the split of the performance between volume, price, and mix in Q1 for the fashion and leather division. And the second question is about the performance of Gucci in the US that improved a lot, and North America sequentially accelerated to 8% in Q1. Was the performance broad-based across product category or any product category doing better than the others? And also, is it a question of initiatives taken in the U.S. or marketing campaign resonating better with the U.S. consumer leading to that strong performance in the U.S.? Thank you very much.

Thank you, Anne-Laure. So let me answer to your first question. I would say that in Q1, we didn't take any actions on the pure pricing reasons. But at the same time, we had some improvement in the AUR. As I was saying, especially thanks to the good performance of the new net that was introduced with a slightly higher average AUR. And in terms of volume, as you know, traffic was still very soft. So basically, we suffered on volume and we gained on pricing through the mix. Regarding your second question, in the USA, yes, we are very happy to see these positive trends. You know, it has been improving for several quarters, progressively, as the performance of Gucci in North America is supported by the performance of the N-backs. You remember the very strong success of the Giglio, for instance, but also new introductions are resonating very well in the U.S. But we have also positive trends in ready-to-wear and in shoes. And I would say in terms of clientele, as it is the case for our other maison, there is in the U.S. probably a slightly better resilience of the high-end part of the clientele.

Thank you very much. Thank you. Your next question today comes from the line of Chiara Battistini from JP Morgan. Please go ahead.

Good evening. Thank you very much for taking my questions. A couple of follow-up questions on Gucci, please. The first question, actually following up on Edward's point, and the different performance between China and North America. Besides China, the other regions also remain in double-digit negative territory. So I was wondering, really, taking a broader picture on what is really differentiating your performance between North America and the rest of the world, if you could share more color. And I guess, indeed, we're going to hear more about that this week, about thinking about the broader world rather than just China, what you're feeling that needs to change. outside of North America, or what are the learnings you're seeing from North America that you can apply everywhere else in the world? Second question on the space closures in Q1 at Gucci. I was wondering if you could help us with any impact from increased space closures on the Gucci performance in Q1 versus Q4, if there was an incremental negative impact there. And finally, maybe a question on jewelry and the very strong performance there and accelerating performance. I was wondering to what extent there's been price increases in the quarter that helped the acceleration. And besides pricing, if you're seeing any accelerating demand underlying and what's driving that in your view. Thank you.

Thank you, Chiama. So on your first question, as you know, I think we are working on improving the situation at Gucci in many fronts, but probably the traction and the reaction to those actions is starting better in the U.S., but we are considering it's going to happen across the region within some time. You know that there is more work to do in China. We've been always very clear about that. But I would say, in general, we are working on the product architecture on the product offer. You know that we have simplified the number of SKUs. We are making sure we have a sharper offer. We are making sure also we introduce newness. And of course, we are working on the communication as well, as we absolutely need to work on the traffic to our stores. And yes, it's going to take a bit more time in China. You know in China that probably we've been hurt a bit more in terms of image, and it was the case in the U.S., But we are tackling the issue one after the other. In terms of store closures, yes, at Gucci in Q1, we have closed net 11 stores. So, yes, it has a small impact on the sales. But as you know, we pay a lot of attention. to recoup majority of the sales by working on the clientele of the store that we are closing, by making sure that we transfer some sales associated for the closed store to the next one. So it's quite difficult to actually have a clear number on the impact net-net. But yes, we are continuing on our plan and we are very confident that we are going to execute the store closure plan for Gucci and for the rest of the houses as we planned at the beginning of the year. Regarding the third question on the jewelry, yes, right, in the context of the gold increase, we've had some price increases, for example, at Boucheron in Taiwan, and we know that in Japan and Korea, It certainly has partially the performance in Q1, and it's important to note now that was not the only reason for the very good performance of jewelry in Q1. I think the category is quite resilient. We have brands that have a very clear positioning, a very good execution, and also maybe to note in Q1 for Boucheron, We introduced the new ring in the cat line, which is the XS, and it was very successful in every region.

Thank you. We will now go to the next question. And the question comes from the line of Antoine Belge from BNP Paribas. Please go ahead.

Yes, hi, it's Anton Bezat, DNP Parallels. Three questions, the first one being more like a clarification on the wording. So, I think you confirmed you want to return to growth, so I think you had said earlier that all brands would be positive in terms of organic growth in 2026, so is it confirmed for all brands, notably Gucci after the rather soft start to the year, or does it mean that you want to be back to positive sometime in 2026? My second question relates to the consensus for group operating profits, which was, you know, that you disclosed recently, about 1.9 billion. I think last year you did more than 1.6, 1.9 is like almost 20%. year-on-year increase, can you confirm that the gross margin guidance is still for around flat-ish and also OPEC flat, which would mean that any EBIT, any EBIT margin improvement would come from the top line? And point number three is actually On OPEX, on the assumption that OPEX is still the guidance, can you maybe one comment a bit on the moving part? Are there some savings that will be found and reinvested, especially? I mean, we've heard about new platforms being put in place, and also looking at the Middle East, are you taking some special action, or are you waiting a bit to know a bit more how the conflicts... will evolve before re-changing OPEX and CAP's commitment.

Thank you. Thank you, Antoine. So, on your first question, I'm not going to comment specifically the consensus, but yes, this is the ambition to return to growth and to improve margins for all brands, excluding Alexander McQueen. you know considering and maybe to add some color on your question on OPEX we have done a lot of work on efficiency and considering the work that we are still doing actually I confirm that I think we can at least maintain our margin stable even without growth so this is probably a slight improvement on what you were expecting on OPEX Now, you know, the reasons for OPEC savings are always the same. We are making a lot of effort on efficiency, on the support function, on the efficiency in the company, in the group between the brand and the houses, on the procurement, on the transport cost, on many elements. But at the same time, we are continuing to invest only in our brands. in clientele, in communication, and in store refurbishment, because it's true that we've been talking a lot about store closure, but I want also to mention that we are upgrading the network by doing some refurbishment and relocation, when we can relocate in a better location, especially in the mall in Asia. Regarding maybe gross margin, you know gross margin, our difficulties to forecast red, so for the moment, no reason to change what I said. Now, you know, there are many moving pieces in the gross margin, but for the moment, we still keep the same forecast.

And just one precision, the ambition is to go back to growth for each of our brands, excluding McRae's business margin.

Sorry.

Okay, maybe just one follow-up specifically on the on the impact of the store closures. What is the impact on the even margin if there is one already this year? Yeah, is that something that, you know, is a bit hurting a bit the sales, but has a positive impact on margin or not really? Yeah, any?

Yes, so as you imagine, we close under productive stores. So actually, the impact on the diabetes margin is slightly positive.

Thank you very much and see you soon.

See you soon. Thank you. We will now take the next question. And the question... One moment, please. The question comes from the line of Luca Solka from Bernstein. Please go ahead.

Yes, hello, good evening, and I was wondering whether you could help us understand what is working best at Gucci when it comes to seeing the green shoots of the brand working, for example, in the U.S.? Is it the higher end? Is it the fashion? Is it the remaining streetwear components, or is it... anything else that you start to see as a potential formula that you could export elsewhere. If we dig a bit deeper in the marketing mix and whether it's a product, it's an animation, or anything else that you could potentially use as a template in other regions as well to produce a similar positive impact. On a different note, I was curious to hear a bit more about Balenciaga. This seems to be a major departure with the new creative director at the helm of this brand. I wonder what reports you have on this change, which is making Balenciaga very different from what it was before. and how this is being received in various regions. And then maybe if you could also give us a little bit more granularity on what you think Gucci is missing in China. You were talking about Gucci having problems of its own and some of the brand equity being damaged. I was wondering... If you could be a little bit more specific, was it a matter of insufficient communication, inappropriate product execution, wrong locations, wrong social media involvement? Where do you think is the action point that you could potentially use to make the brand move forward in that region? Thank you very much.

Thank you, Luca. So on your first question, I would say if we look at the U.S., at North America, we have positive trends in handbags, but also in ready-to-wear and shoes. We see slightly better response in the I.N., but, you know, that is, I think, across the board in the U.S. and not specific, at least within our group, not specific to Gucci in particular. I would say that I think what is very important is the 360-degree approach that we are taking to both products, communication, clienteling, and distribution to make sure that we align all elements, not just counting on the new creativity. but making sure that from the product introduction up to the retail experience in store, up to the clienteling, also our communication. I think we've managed this year to have a strong fashion moment during the fashion show, but also not to rely completely on that and have a lot of commercial activations in stores. And, of course, the work done by Gucci. is to align all those elements in also probably with a very strong effort to have a very clear product architecture across categories and show that there is a coherent brand expression across the categories, across the price points, but with an offer that is relevant at different price points for different types of clients in the different categories. So this is the work that you will see developing along the year with the new introduction. I think we are happy to see the traction of the new product, but we are also happy to see that the carry-over are much more resilient, that the introduction also of last year are continuing to be successful. I mentioned the new Marmont. I can also mention Emblème. Emblème in APAC is still ranking very well in our handbag sales. And that's good news because it's good to introduce successful units, but we also need to have a strong portfolio of products over time. Regarding Balenciaga, yeah, sorry, maybe you asked about Balenciaga, but maybe I will go to China to complement the first point. You know, in China, what we consider is that we have to work to make sure that Balenciaga Gucci has a cultural relevance in China and a disciplined execution. We are working more and more to localize this storytelling in a way that resonates with the Chinese consumer, having a stronger focus on some products aligned with local demand. We are working on distribution. We are, you know, over-distributed in China, so we want to upgrade our network with less store, fewer store, but better store, with a higher level of client engagement. And for that also, we continue to increase and better target our marketing investments. Maybe an example of that is La Familia, the only region where we did a sort of interpretation of the movie with some Chinese actors. We had a very strong response in China in terms of engagement on social media, discussion, and probably, you know, this was a very good initiative to connect with, you know, the worldwide event of the La Familia Tiger movie, but also making sure it resonates with the Chinese in their country. So this is really to find the right balance and making sure that we have a localized go-to-market strategy and that's very important, I think, going forward. Of course, it has also some other implications. At Gucci, you know, the level of collaboration between the headquarters and the region is even more important than in the past to make sure that we both push the global strategy of the brand, but also making sure that we take into account all the findings and all the important elements that the region can bring to the headquarter. And maybe your, and also an example of that, I think we are happy with Emblem. Emblem is still doing very well in APAC. You know, Emblem is aligned with some smaller banks. We also introduced a mini-GG and a small GDO to make sure that we have products that are relevant for China. even if they are part of a worldwide line in terms of functionality, in terms of size. Coming back to your question on Balenciaga, it's true that Pierpaolo Piccoli brings a renewed direction to the brand. We think it's going to help us to strengthen the house identity without compromising its edge. You can see, if you've been into the so that his impact is really already, you can see, especially on the ready-to-wear collection, especially with the clear silhouette, a stronger women's composition. You know that Balenciaga was very much skewed towards men, especially in ready-to-wear. We think we have another opportunity to develop the brand also in the women's ready-to-wear. And apart from the new creativity of Pierre, We are also happy to see the handbag developing very well at Balenciaga. You know, the brand was quite unbalanced in terms of category, and the handbags are developing very well. And, again, I think that we can consider that Rodeo and Citi are really, you know, starting to be so tense and sort of icons. They are very successful in all regions, which is very good news.

Thank you. We will now go to the next question. And the next question comes from the line of Pearl Dadahania from RBC. Please go ahead.

Okay, thank you. Good evening, everybody. My first question is on Kering Jewelry, which has obviously been the best performing vertical within the portfolio. So congratulations on that. Could you maybe just elaborate a little bit on the performance by brand? Is there anything, well, what are the specifics, if I could put it that way, in terms of where the momentum is coming from is my first question. And the second part to that is I think there's a technical factor related to the rest of the world, which I think grew 176%. whilst the royalties declined by something like 50 plus percent. So could you just help us understand what's happened there in terms of how the business is structured in the rest of the world? And then secondly, just following on from Antoine's question, I was just wondering if you're able to help us understand or quantify the magnitude of the cost savings that you expect to deliver in 2026. The reason we ask is we're just trying to understand whether you'll be able to deliver the level of margin expansion that the market is anticipating despite negative organic revenue growth, particularly in H1. Thank you.

Thank you, Piral. So let me come back to carrying through. That is true. We had a very good quarter. I can try to give you a bit more cover, brand by brand. You know, we had actually a very good and positive performance in all four brands of the portfolio, which is good news. Certainly, the performance was strong in APAC, where those brands are actually very strong. You know, Boucheron is strong in Japan, in Korea, but also... And that has been one of the great developments of the few last years in China. We just opened, actually, a very nice flagship in Shenzhen. Pomerato is also doing well. And Chile is doing well. I would say probably Europe was a bit more difficult. And for the U.S., you know that we are underdeveloped at the moment in North America for jewelry. We have a plan to develop Boucheron. Actually, the results are according to the plan in North America, but we also know that it will take time because we have to develop the awareness of the brand in the U.S. Of course, you will have more information on jewelry during the Capital Market Day. So I'm sure you will have a lot of more color on this new business segment for us. Regarding, I think your second question was on the performance of the rest of the world. You know, this one was affected for sure by the event, the conflict in the Middle East. So we had a performance that was low double-digit negative. But it was actually concentrated on one month in the three, so you can make your own calculation and imagine what it was doing in March. Our stores were closed at the beginning. They are actually today operational. But in the Middle East, it's tourist flows that are suffering more than the locals. In terms of cost saving, so you remember I said that we were aiming, in February, we were aiming to be OPEX flat this year, which means some efforts, because to be OPEX flat, we are continuing to invest strongly behind the branch in terms of marketing, client saving, product development, and so forth. It means that we are doing some efficiency on the non-client-facing areas. We are working on that. Of course, we are trying to... to continue to go further. I'm not going to give you some numbers at this stage, but of course, it's a continued effort. We are developing some programs to be more efficient. Here again, during the CMD, you will have more color on the organization of the group and the platform that we announced. And probably on the longer term, We expect that it will help us also be more efficient going forward in the coming years.

Thank you. Look forward to the additional detail. Thanks.

Thank you. Our next question today comes from the line of Oliver Chen from TD Cowen. Please go ahead.

Hi, Arnaud and Philip. Thank you very much. Regarding Gucci, what are your thoughts or what's happening on conversion relative to traffic across the U.S. versus China, and any thoughts on what you're seeing on that conversion versus traffic angle? And second, on Gucci, and you continue to talk to work on elevation. How should we think about the marketing and communication plans and specifically any thoughts on what's fixed versus variable and what your plans are regarding what you're seeing in terms of that factor? And then thirdly, on supply chain, what's ahead in terms of the intersection of speed and supply chain as well as on Any bits on how you're innovating with AI in that context to drive a responsive supply chain, given all the change we've been all seeing in brands in different stages? Thank you.

Thank you, Eva. And so your first question on Gucci, you know, traffic is still soft for Gucci in many regions with some differences. Of course, it's more positive in North America than it is in the back, especially in China. What we experienced in Q1 is an improvement in conversion, which for us is encouraging because it means that all the effort that we are putting in the product, but also in the training of our sales associates, in the retail experience in stores, is starting to bear fruit. Of course, it does not completely offset the softness of the traffic, but it's a very good sign to see conversion going up, and it's going up in all regions, including China. In terms of marketing and communication, I'm not sure I got completely quite your question. Maybe just to say that we continue to invest probably behind our brand. We're going to keep an AMP that will be high single digit of sales. And we are working on the ROI of our action, being more scientific, I would say, in terms of how we allocate the resources in communication and marketing. to make sure that we get the best results on our investment. For that, here again, we have Treson, also the organization at Google, and we are also working at Gucci to make sure that we allocate between the different pockets of communication with the best ROI, both in terms of media, but also in terms of regions, in terms of activations. So this is really a very disciplined way to execute. issues, marketing, and communication. Lastly, your question on supply chain speed. Speed and agility are very important. You know also that we have a strong objective to be more efficient in terms of inventory levels, and supply chain and industrial production is not the only one, but it's also a role that is very important in the efficiency of our Maison. And, of course, we rely a lot on new technology in that direction. But for that, you will have plenty of very interesting additional information at the CMD. So stay tuned.

Okay, thank you. One follow-up on Gucci. You spoke to this, but the handbag pricing matrix, Are you comfortable with where it is now, and what are your thoughts on the price ranges and the families and making sure that you both elevate but communicate value to the customer, you know, the balance of doing both? Thank you.

Yes, on the end, yes, I think if you look at the product architecture now, it's very clear. I mean, we really make sure that we have an offer at a different layer in terms of price, but also in terms of functionality, in terms of client base. And in terms of price, we have now some newness and strong proposal at the different level of the pyramid. That's very important. It's important in terms of pricing. You know also that we are very aware of the importance for the customer of a good perception of the value for money. And at the same time, we also increase the quality of the product. That's very important. So it's a combination of pricing, but also quality and creativity and innovation in the product at every level. of the proposal. And we really want to expand because we think that we can be, could be relevant both at the NC level, at the core, but also at the IN.

Okay, great. See you soon. Can't wait.

Thank you. Thank you. Our next question today comes from the line of Charles-Louis Scotti from Kepler Shriver. Please go ahead.

Good evening. Thank you for taking my questions. I have three. The first one, within the fashion analysis division, other brands grew 2% like for like in Q1. You provided some qualitative comments on each brand. Could you please specify which ones outperformed this segment and which ones underperformed? My second question, I just want to make sure that I understood you correctly. Did you mention that the organic stress growth will have been around 3% in March at the group level, excluding the impact of the Middle East conflict? And is that excluding only the impact within the Middle East region itself, or does it also exclude and the Middle Eastern customers spending abroad. And the last question, you closed 47 stores in Q1, and your target is at least 100. So we roughly have already achieved after Q1 where closures can't be loaded, or is the 100 target conservative in this environment, meaning you could go faster than initially planned on store closures? Thank you.

Yes, thank you. So, regarding the other brands within the fashion and leather goods segments, Saint Laurent, Bottega Veneta and Balenciaga all posted a nice growth in Q1 and all sequentially improved versus Q4. If I can give you a bit more color, Bottega Veneta posted the strongest growth and Balenciaga the strongest sequential improvement. Regarding your second question, yes, I confirm that March would have perceived a plus 3% growth without the Middle East impact, and I'm talking about the Middle East itself, the region. And for the short question, yes, we have closed the 47 net stores, and we mentioned, we announced that we would close at least, I mean, we are on the plan, and we are delivering the plan with confidence.

Thank you.

Thank you. We will now take our final question for today. And our final question comes from the line of Xana Puz from UBS. Please go ahead.

Thank you for taking my question. I have just one, actually, to follow up regarding the output. And sorry we're so annoying following up on this, but it's quite important for us from a modeling perspective. Can I just clarify? When you refer to objectives of sales growth in 2026 for every brand excluding McQueen, is it that sales grow for the full year or that the brands return to growth at some point during the year? Just because I don't think I got it, so it's just a very quick one. Thank you.

Thank you, Susanna. So, yes, just to clarify, Yes, our mission is to be back to growth for all businesses except marketing for the full year.

Excellent. Thank you. Thank you. There are no further questions at this time. I will now hand the call back to Amartya for closing comments.

Thank you very much for your interest and for your questions. I want to remind you that Philippine and her team are available to go over any point that requires more clarification. We are all very happy to see you in two days. Have a good evening and thank you again.

Thank you, ladies and gentlemen. Thank you for joining. The conference is now over. You may disconnect your telephones.